What Counts as a Financed Property

Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Steve: This is Steve Bighaus with Security National Mortgage. I would like to wish everyone a good morning. And I’m the host of the REI Classroom. Today we’re going to talk about what counts as a financed property.
Mike: This REI Classroom real estate lesson is sponsored by uglyopportunities.com.
Steve: A lot of confusion on this subject. So you get times when people will tell you that when you’re looking at the financed property, it’s only loans that you have reported on your credit report through refinance with Fanny Mae or Freddie Mac. That is not true. The key term on this, and that is “financed properties.” So what they do, and as Fanny Mae doesn’t care if you have to carry a private note on it, maybe Mom and Dad gave you some money, maybe a commercial bank. They are considered a financed property. The source of the financing is irrelevant. If it’s financed, it’s yours. So that’s it.
So when we’re looking at Fannie Mae and Freddie Mac, the only thing that they’re going to count in there are one- to four-family units. So if you’ve got a commercial property, that’s not going to count. If you’ve got a five-unit property, that’s not going to count. And then the other thing is bare land. Bare land won’t count either. So it’s really easy to, once you understand and make that determination as far as what counts and what not.
But again, it’s really important to recognize that the financing, just because it doesn’t report on your credit report doesn’t count. And where we’re going to pick it up at, as a lender, is we’re going to look at your tax returns. And at many cases, because I’m working with a lot of investors, they have multiple funding sources and if I see that there’s interest declared on your tax return when they ask you about it, and if it’s a single family, I’m definitely going to count that against you. So we’re going to have to get the information.
The other thing there’s been some confusion as far as, like, if you have a commercial loan that maybe has two single-family units financed within one commercial loan. Does that count as one, or does that count as two? A lot of people out there will tell you it counts as one. Again, an erroneous statement simply because of the fact it doesn’t say loans, it says financed properties. And if you have two single-families in that one loan that are financed property, it will count as two financed properties.
So just want to clear this up because as I say, it does become a point of conversation with a lot of my borrowers. I want to set them straight. I’ve been doing this a long time, so I know the rules and want to make sure that we don’t, you know, we don’t have any glitches when we’re doing a file with our borrower.
So again, if you’ve got any additional questions on this subject, feel free to give me a call. Steve Bighaus, Security National Mortgage, and thank you very much.
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